The developer of Curtis Park Village says its high-profile infill project is at risk because local housing authorities are improperly shifting affordable-housing tax credits to another effort.

In a pair of letters sent to the city last week, an attorney for Petrovich Development Co. said the city of Sacramento faces legal action if it doesn’t immediately order the Sacramento Housing and Redevelopment Agency to drop pursuit of a proposed allocation of tax credits to an existing affordable housing rehabilitation project in midtown.

The developer says the city already committed to requesting those credits for Curtis Park Court, an affordable-housing project within the larger Petrovich development adjacent to Curtis Park.

The City Council was scheduled to discuss the dispute in closed session Thursday. But there are indications the city could be sued no matter what it does.

Petrovich counsel Kenneth King, in a May 29 letter to the city, notes that the housing agency has entered into agreements with nonprofit Bridge Housing of San Francisco, which is proposing the midtown project. But problems with the deal “are so serious that the city would be a party to fraudulent activity if it permitted SHRA to proceed.”

Without the tax credits, according to King’s letter, Curtis Park Court won’t be finished by a deadline of December 2016, leaving Petrovich responsible for reimbursing $9.1 million in state housing funds.

In turn, that would lead to a default on $41 million worth of loans, and equity losses of about $35 million, the May 29 letter states.

Domus Development, which is building Curtis Park Court on behalf of Petrovich, applied last year for 9-percent tax credits from the California Tax Credit Allocation Committee, with the City Council directing SHRA to make the project the city’s top priority.

After Domus didn’t receive the credits, the company applied again this year, again with a city vote to make it a priority.

But King says the SHRA in the meantime had begun working with Bridge Housing on applying for those same tax credits for rehabbing the SHRA-operated Sutterview affordable housing project at 2526 L St.

According to a source familiar with the situation, Bridge officials have threatened legal action if that firm’s application is withdrawn, leaving the city with legal exposure either way.

SHRA executive director LaShelle Dozier said her agency has long worked with both projects. But the tax-allocation committee ranked Sutterview on top, even though the city and SHRA had said Curtis Park Court was a priority project, Dozier said.

“I understand his level of frustration,” Dozier said, referring to King’s letter. But “Without redevelopment, the competition for tax credits or any funding for any kind of affordable housing is very, very competitive.”

King of Petrovich and Meea Kang of Domus Development say Sutterview is a less-worthy project — in part because it will only rehabilitate, rather than create, affordable housing.

Lyn Hikida, a spokeswoman for Bridge Housing, said the planned work at Sutterview would cover asbestos remediation, seismic upgrades and other rehab work necessary to keep the project viable for the future.

“The reality is that there is a dearth of funding for affordable housing — new construction and rehab alike,” she said in an email.